Calculate the Price of a European Call Option Using the Black

question 45

Multiple Choice

Calculate the price of a European call option using the Black Scholes model and the following data: stock price = $56.80, exercise price = $55, time to expiration = 15 days, risk-free rate = 2.5%, standard deviation = 22%, dividend yield = 8%.

• A) $1.49
• B) $1.79
• C) $2.19
• D) $2.29

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Definitions:

Fixed Costs

Costs that do not change with the level of output produced by the firm, such as rent, salaries, or loan repayments.

Positive Reinforcement

A method in behavior psychology where a positive stimulus is presented after a desired behavior, increasing the likelihood of that behavior in the future.

Desirable Behaviour

Actions or conduct that are considered favorable or appropriate in a particular context.

Frequency

A measure of how often an event occurs.